Resideo Releases Third-Quarter 2019 Results In-Line With Oct. 22 Preliminary Results

Third Quarter Highlights

Published

AUSTIN, Texas, Nov. 6, 2019 /PRNewswire/ -- Resideo Technologies, Inc. (NYSE: REZI), a leading global provider of home comfort and security solutions, today reported third-quarter financial results for the quarter ended Sept. 30, 2019. The company's revenue and adjusted EBITDA (non-GAAP) for the third quarter are consistent with the expected results announced on a preliminary basis in October.

"I am disappointed in our results for the third quarter. While ADI continued its strong performance, results in our Products & Solutions segment were adversely impacted by volume declines, product and channel mix, inventory write-downs, and high product rebates from a pre-spin contract," said Mike Nefkens, president and CEO of Resideo. "We remain confident in the fundamentals of our business. We are taking the following actions to improve business performance:

  • working with our channel partners to improve the positioning of the T-Series line of non-connected thermostats;
  • rebuilding value engineering and sourcing capabilities to drive increased gross margins; and
  • conducting a comprehensive operational and financial review of the company to simplify operations, increase gross margins, reduce cost structure, and drive sales growth."

Third-Quarter Performance

Net Revenue for the third quarter was $1.23 billion, up 2% year-over-year on a GAAP basis and up 3% year-over-year on a constant currency basis (non-GAAP). Adjusted EBITDA (non-GAAP) was $79 million, or $114 million excluding the Honeywell reimbursement agreement cash payments (non-GAAP). Third-quarter Net Income was $8 million and adjusted Net Income (non-GAAP) was $23 million, or $58 million excluding the Honeywell reimbursement agreement cash payments. Basic and diluted earnings per share were $0.07 and $0.08, respectively, and adjusted basic and diluted earnings per share (non-GAAP) was $0.19.

In the third quarter, the ADI Global Distribution business continued its strong growth. The Products & Solutions segment experienced revenue declines.

ADI Global Distribution revenue increased by 6%, and 7% on a constant currency basis year-over-year. Segment performance was driven by solid growth across all regions. Segment adjusted EBITDA increased year-over-year by 12%. Growth in the quarter was enhanced by an ongoing focus on digital transformation, designed to create a seamless experience for professionals online and in the 200 stocking locations around the world. ADI continued to expand its footprint in the third quarter, including opening and remodeling branches in Eastern Europe.

Products & Solutions revenue decreased by 3% and 1% on a constant currency basis year-over-year, driven by declines in the Comfort and Residential Thermal Solutions (RTS) gas combustion businesses. Segment adjusted EBITDA for the third quarter decreased year-over-year by 38% due to revenue decline, negative product and channel mix, inventory write-downs, and higher customer rebates.

Water products grew double digits in North America and Resideo expects continued growth with the launch of the Buoy® Whole Home Water Controller in the fourth quarter. Registered connected customers have shown strong growth from 4.7 million in 2017 to more than 6.3 million at the end of the third quarter 2019. 

The RTS business experienced a slowdown across large OEM customers, which included impacts by recent regulatory changes. The Comfort business revenue declines were primarily due to lower thermostat sales. Resideo believes a poor pre-spin transition from the prior generation of non-connected thermostats to the T-Series line impacted the adoption of mid-level T-Series thermostats and related profit margins. The revenue and margin effects became more pronounced in the third quarter after the prior generation of non-connected thermostats was discontinued. The company is working with its channel partners to enhance and better position the T-Series and expects improvement in 2020.

The company's new generation of security products and connected thermostats have experienced solid growth. However, these products have yet to benefit from lifecycle value engineering, adversely impacting full-year 2019 Products & Solutions segment gross margins. The company is actively investing in its value engineering team and anticipates improvement to gross margins over the next 18 months.

Cash Flow Generation

The company reported a use of cash from operations of $70 million for the nine months ended Sept. 30, 2019, driven largely by increased inventory and cash payments related to the Honeywell reimbursement agreement.

Total debt increased $52 million to $1.25 billion. Liquidity remains strong and is supported by a $350 million revolving credit facility, under which $60 million was outstanding as of the quarter end.

Full-Year Guidance

The company expects the third-quarter headwinds to continue into the peak winter demand period, which is expected to reduce previously anticipated full-year 2019 Products & Solutions segment revenue by approximately $110 million. Approximately $66 million of this expected shortfall is from Comfort, $22 million is from RTS, and $22 million is from Security.

Full-year adjusted EBITDA guidance was reduced due to the lower revenues, higher-than-anticipated contractual customer rebates, inventory write-downs, and continued mix headwinds.

As noted in its October preliminary release, Resideo updated its full-year 2019 guidance for GAAP revenue growth of 2% to 4%, as compared to the previously expected range of 2% to 5%. The company also updated its full-year 2019 adjusted EBITDA guidance to be in the range of $330 million to $350 million, compared to the previously expected range of $410 million to $430 million.

Operational and Financial Review

Resideo has begun a comprehensive operational and financial review, to be overseen by the independent directors of Resideo's board, and has retained industry-recognized experts in supply chain optimization and organizational excellence to assist in the review.

The review will build upon the previously announced cost optimization program, which is on track and expected to achieve approximately $15 million in realized savings in 2019 and $50 million in run-rate savings by the end of 2020. ­

"As a spinoff from a much larger business, we believe we have a significant opportunity to right-size our infrastructure and simplify our core processes," said Bob Ryder, interim CFO of Resideo. "This is designed to reduce our direct and G&A costs, increase profit margins, and enable a path to higher sales growth."

Resideo plans to discuss project savings, costs and expected timelines in conjunction with the announcement of its fourth-quarter and full-year 2019 financial results, expected in February 2020.

Table 1: Summary of Financial Results – Segment
($ millions)
 3Q 2019   3Q 2018   % Change 
Products & Solutions
Revenue (1) 512 526 -3%
Constant Currency (Non-GAAP) -1%
 Segment Adjusted EBITDA (2)(3) 66 107 -38%
ADI Global Distribution
Revenue 714 674 6%
Constant Currency (Non-GAAP) 7%
 Segment Adjusted EBITDA (2)(3) 48 43 12%
Total Company
Revenue 1,226 1,200 2%
Constant Currency (Non-GAAP) 3%
Adjusted EBITDA (Non-GAAP) (4) 79 117 -32%
(1) Represents Product & Solutions revenue, net of intersegment revenue of $83 million for the three months ended September 30, 2019 and $77 million for the three months ended September 30, 2018, respectively. ADI Global Distribution does not have any intersegment revenue.
(2) Excludes $2 million of estimated stand-alone costs for the three months ended September 30, 2018 which is included in Adjusted EBITDA (Non-GAAP).  
(3) Table 7 includes a Reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes.
(4) Table 6 includes a Reconciliation of Net income to Adjusted EBITDA (non-GAAP).

Conference Call

Resideo will hold a conference call with investors on Nov. 7, 2019, at 8:30 a.m. EST. To join the conference call, please dial 888-599-8688 (domestic) or +1 323-994-2135 (international) approximately 10 minutes before it starts. Please mention to the operator that you are dialing in for Resideo's third quarter 2019 earnings call or provide the conference code 934775. A replay of the conference call will be available from 12:30 p.m. EST Nov. 7, until 12:30 p.m. EST Nov. 14, by dialing 888-203-1112 (domestic) or +1-719-457-0820 (international). The access code is 9530930.

A real-time audio webcast of the presentation will be accessible at https://investor.resideo.com, where related materials will be posted before the presentation, and a replay of the webcast will be available for 30 days following the presentation.

About Resideo

Resideo is a leading global provider of critical comfort and security solutions primarily in residential environments and distributor of low-voltage electronic and security products. Building on a 130-year heritage, Resideo has a presence in more than 150 million homes, with 15 million systems installed in homes each year. We continue to serve more than 110,000 contractors through leading distributors, including our ADI Global Distribution business, which exports to more than 100 countries from more than 200 stocking locations around the world. Resideo is a $4.8 billion company with approximately 13,000 global employees. For more information about Resideo, please visit www.resideo.com.

Contacts:

Table 1: Summary of Financial Results – Segment Media:         Investors:
($ millions) Trent Perrotto     Michael Mercieca
(512) 726-3512    (512) 779-8646
 3Q 2019   3Q 2018   % Change  trent.perrotto@resideo.com     michael.mercieca@resideo.com
Products & Solutions investorrelations@resideo.com  
Revenue (1) 512 526 -3%
Constant Currency (Non-GAAP) -1%
 Segment Adjusted EBITDA (2)(3) 66 107 -38%
ADI Global Distribution
Revenue 714 674 6%
Constant Currency (Non-GAAP) 7%
 Segment Adjusted EBITDA (2)(3) 48 43 12%
Total Company
Revenue 1,226 1,200 2%
Constant Currency (Non-GAAP) 3%
Adjusted EBITDA (Non-GAAP) (4) 79 117 -32%
(1) Represents Product & Solutions revenue, net of intersegment revenue of $83 million for the three months ended September 30, 2019 and $77 million for the three months ended September 30, 2018, respectively. ADI Global Distribution does not have any intersegment revenue.
(2) Excludes $2 million of estimated stand-alone costs for the three months ended September 30, 2018 which is included in Adjusted EBITDA (Non-GAAP).  
(3) Table 7 includes a Reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes.
(4) Table 6 includes a Reconciliation of Net income to Adjusted EBITDA (non-GAAP).

 

Table 1: Summary of Financial Results – Segment Media:         Investors: Table 2: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS (UNAUDITED)
($ millions) Trent Perrotto     Michael Mercieca
(512) 726-3512    (512) 779-8646 Three Months Ended Nine Months Ended
 3Q 2019   3Q 2018   % Change  trent.perrotto@resideo.com     michael.mercieca@resideo.com September 30, September 30,
Products & Solutions investorrelations@resideo.com   2019 2018 2019 2018
Revenue (1) 512 526 -3% (Dollars in millions except per share data)
Constant Currency (Non-GAAP) -1% Net revenue $              1,226 $              1,200 $              3,684 $              3,561
 Segment Adjusted EBITDA (2)(3) 66 107 -38% Cost of goods sold 937 853 2,786 2,525
ADI Global Distribution Gross profit 289 347 898 1,036
Revenue 714 674 6% Selling, general and administrative expenses 230 219 712 648
Constant Currency (Non-GAAP) 7% Operating Profit 59 128 186 388
 Segment Adjusted EBITDA (2)(3) 48 43 12% Other expense, net 35 144 54 320
Total Company Interest expense 16 2 51 2
Revenue 1,226 1,200 2% Income (loss) before taxes 8 (18) 81 66
Constant Currency (Non-GAAP) 3% Tax expense (benefit)   - (329) 36 (323)
Adjusted EBITDA (Non-GAAP) (4) 79 117 -32% Net income $                    8 $                 311 $                   45 $                 389
(1) Represents Product & Solutions revenue, net of intersegment revenue of $83 million for the three months ended September 30, 2019 and $77 million for the three months ended September 30, 2018, respectively. ADI Global Distribution does not have any intersegment revenue. Weighted Average Number of Common Shares Outstanding (in thousands)
(2) Excludes $2 million of estimated stand-alone costs for the three months ended September 30, 2018 which is included in Adjusted EBITDA (Non-GAAP).   Basic 122,770 122,967 122,681 122,967
(3) Table 7 includes a Reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes. Diluted 123,244 122,967 123,404 122,967
(4) Table 6 includes a Reconciliation of Net income to Adjusted EBITDA (non-GAAP). Earnings Per Share
Basic $                0.07 $                2.53 $                0.37 $                3.16
Diluted $                0.06 $                2.53 $                0.36 $                3.16

 

Table 1: Summary of Financial Results – Segment Media:         Investors: Table 2: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS (UNAUDITED) Table 3: CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED)
($ millions) Trent Perrotto     Michael Mercieca
(512) 726-3512    (512) 779-8646 Three Months Ended Nine Months Ended September 30, December 31, 
 3Q 2019   3Q 2018   % Change  trent.perrotto@resideo.com     michael.mercieca@resideo.com September 30, September 30, 2019 2018
Products & Solutions investorrelations@resideo.com   2019 2018 2019 2018 (Dollars in millions, shares in thousands)
Revenue (1) 512 526 -3% (Dollars in millions except per share data) ASSETS
Constant Currency (Non-GAAP) -1% Net revenue $              1,226 $              1,200 $              3,684 $              3,561 Current assets:
 Segment Adjusted EBITDA (2)(3) 66 107 -38% Cost of goods sold 937 853 2,786 2,525 Cash and cash equivalents $                 132 $                 265
ADI Global Distribution Gross profit 289 347 898 1,036 Accounts receivable 845 821
Revenue 714 674 6% Selling, general and administrative expenses 230 219 712 648 Inventories 729 628
Constant Currency (Non-GAAP) 7% Operating Profit 59 128 186 388 Other current assets 134 95
 Segment Adjusted EBITDA (2)(3) 48 43 12% Other expense, net 35 144 54 320 Total current assets 1,840 1,809
Total Company Interest expense 16 2 51 2 Property, plant and equipment – net 306 300
Revenue 1,226 1,200 2% Income (loss) before taxes 8 (18) 81 66 Goodwill 2,632 2,634
Constant Currency (Non-GAAP) 3% Tax expense (benefit)   - (329) 36 (323) Other intangible assets – net 125 133
Adjusted EBITDA (Non-GAAP) (4) 79 117 -32% Net income $                    8 $                 311 $                   45 $                 389 Other assets 230 96
Total assets $              5,133 $              4,972
(1) Represents Product & Solutions revenue, net of intersegment revenue of $83 million for the three months ended September 30, 2019 and $77 million for the three months ended September 30, 2018, respectively. ADI Global Distribution does not have any intersegment revenue. Weighted Average Number of Common Shares Outstanding (in thousands) LIABILITIES
(2) Excludes $2 million of estimated stand-alone costs for the three months ended September 30, 2018 which is included in Adjusted EBITDA (Non-GAAP).   Basic 122,770 122,967 122,681 122,967 Current liabilities:
(3) Table 7 includes a Reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes. Diluted 123,244 122,967 123,404 122,967 Accounts payable $                 932 $                 964
(4) Table 6 includes a Reconciliation of Net income to Adjusted EBITDA (non-GAAP). Earnings Per Share Short-term portion of debt 88 22
Basic $                0.07 $                2.53 $                0.37 $                3.16 Accrued liabilities 531 503
Diluted $                0.06 $                2.53 $                0.36 $                3.16 Total current liabilities 1,551 1,489
Long-term debt 1,165 1,179
Obligations payable to Honeywell 580 629
Other liabilities 264 142
EQUITY
Common stock, $0.001 par value, 700,000 shares authorized, 123,382 and 122,967 shares issued and 122,786 and 122,499 shares outstanding as of September 30, 2019 and December 31, 2018, respectively - -
Additional paid-in capital 1,751 1,720
Treasury stock, at cost (3) -
Retained earnings 47 2
Accumulated other comprehensive loss (222) (189)
Total equity 1,573 1,533
Total liabilities and equity $              5,133 $              4,972

 

Table 1: Summary of Financial Results – Segment Media:         Investors: Table 2: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS (UNAUDITED) Table 3: CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED) Table 4: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF CASH FLOWS (UNAUDITED)
($ millions) Trent Perrotto     Michael Mercieca
(512) 726-3512    (512) 779-8646 Three Months Ended Nine Months Ended September 30, December 31,  Nine Months Ended
 3Q 2019   3Q 2018   % Change  trent.perrotto@resideo.com     michael.mercieca@resideo.com September 30, September 30, 2019 2018 September 30,
Products & Solutions investorrelations@resideo.com   2019 2018 2019 2018 (Dollars in millions, shares in thousands) 2019 2018
Revenue (1) 512 526 -3% (Dollars in millions except per share data) ASSETS (Dollars in millions)
Constant Currency (Non-GAAP) -1% Net revenue $              1,226 $              1,200 $              3,684 $              3,561 Current assets: Cash flows (used for) provided by operating activities:
 Segment Adjusted EBITDA (2)(3) 66 107 -38% Cost of goods sold 937 853 2,786 2,525 Cash and cash equivalents $                 132 $                 265 Net income $                  45 $                389
ADI Global Distribution Gross profit 289 347 898 1,036 Accounts receivable 845 821
Revenue 714 674 6% Selling, general and administrative expenses 230 219 712 648 Inventories 729 628 Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Constant Currency (Non-GAAP) 7% Operating Profit 59 128 186 388 Other current assets 134 95 Depreciation and amortization 55 49
 Segment Adjusted EBITDA (2)(3) 48 43 12% Other expense, net 35 144 54 320 Total current assets 1,840 1,809 Repositioning charges, net of payments 12 (4)
Total Company Interest expense 16 2 51 2 Property, plant and equipment – net 306 300 Stock compensation expense 22 15
Revenue 1,226 1,200 2% Income (loss) before taxes 8 (18) 81 66 Goodwill 2,632 2,634 Deferred income taxes (3) (275)
Constant Currency (Non-GAAP) 3% Tax expense (benefit)   - (329) 36 (323) Other intangible assets – net 125 133 Other noncash expense 13 17
Adjusted EBITDA (Non-GAAP) (4) 79 117 -32% Net income $                    8 $                 311 $                   45 $                 389 Other assets 230 96 Changes in assets and liabilities:
Total assets $              5,133 $              4,972 Accounts, notes and other receivables (27) (11)
(1) Represents Product & Solutions revenue, net of intersegment revenue of $83 million for the three months ended September 30, 2019 and $77 million for the three months ended September 30, 2018, respectively. ADI Global Distribution does not have any intersegment revenue. Weighted Average Number of Common Shares Outstanding (in thousands) LIABILITIES Inventories (109) (142)
(2) Excludes $2 million of estimated stand-alone costs for the three months ended September 30, 2018 which is included in Adjusted EBITDA (Non-GAAP).   Basic 122,770 122,967 122,681 122,967 Current liabilities: Other current assets (13) (4)
(3) Table 7 includes a Reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes. Diluted 123,244 122,967 123,404 122,967 Accounts payable $                 932 $                 964 Other assets (6) (6)
(4) Table 6 includes a Reconciliation of Net income to Adjusted EBITDA (non-GAAP). Earnings Per Share Short-term portion of debt 88 22 Accounts payable (23) 151
Basic $                0.07 $                2.53 $                0.37 $                3.16 Accrued liabilities 531 503 Accrued liabilities (6) (15)
Diluted $                0.06 $                2.53 $                0.36 $                3.16 Total current liabilities 1,551 1,489 Obligations payable to Honeywell (49) -
Other liabilities 19 211
Long-term debt 1,165 1,179 Net cash (used for) provided by operating activities (70) 375
Obligations payable to Honeywell 580 629 Cash flows used for investing activities:
Other liabilities 264 142 Expenditures for property, plant, equipment and software (66) (63)
EQUITY Cash paid for acquisitions, net of cash acquired (17) -
Common stock, $0.001 par value, 700,000 shares authorized, 123,382 and 122,967 shares issued and 122,786 and 122,499 shares outstanding as of September 30, 2019 and December 31, 2018, respectively - - Proceeds received related to amounts due from related parties - 7
Additional paid-in capital 1,751 1,720 Net cash used for investing activities (83) (56)
Treasury stock, at cost (3) - Cash flows provided by (used for) financing activities:
Retained earnings 47 2 Net proceeds from revolving credit facility 60 -
Accumulated other comprehensive loss (222) (189) Repayment of long-term debt (11) -
Total equity 1,573 1,533 Non-operating obligations paid to Honeywell, net (24) -
Total liabilities and equity $              5,133 $              4,972 Payments related to amounts due to related parties, net - (1)
Tax payments related to stock vestings (3) -
Net (decrease) in invested equity - (300)
Cashflow provided by cash pooling - 115
Net cash provided by (used for) financing activities 22 (186)
Effect of foreign exchange rate changes on cash and cash equivalents (2) (5)
Net (decrease) increase in cash and cash equivalents (133) 128
Cash and cash equivalents at beginning of period 265 56
Cash and cash equivalents at end of period $                132 $                184

 

Table 1: Summary of Financial Results – Segment Media:         Investors: Table 2: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS (UNAUDITED) Table 3: CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED) Table 4: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF CASH FLOWS (UNAUDITED) Table 5: RECONCILIATION OF NET INCOME (UNAUDITED) TO ADJUSTED NET INCOME (NON-GAAP)
($ millions) Trent Perrotto     Michael Mercieca
(512) 726-3512    (512) 779-8646 Three Months Ended Nine Months Ended September 30, December 31,  Nine Months Ended Three Months Ended Nine Months Ended
 3Q 2019   3Q 2018   % Change  trent.perrotto@resideo.com     michael.mercieca@resideo.com September 30, September 30, 2019 2018 September 30, September 30, September 30,
Products & Solutions investorrelations@resideo.com   2019 2018 2019 2018 (Dollars in millions, shares in thousands) 2019 2018 2019 2018 2019 2018
Revenue (1) 512 526 -3% (Dollars in millions except per share data) ASSETS (Dollars in millions) (Dollars in millions except per share data)
Constant Currency (Non-GAAP) -1% Net revenue $              1,226 $              1,200 $              3,684 $              3,561 Current assets: Cash flows (used for) provided by operating activities: Net income (GAAP) $                   8 $               311 $                45 $             389
 Segment Adjusted EBITDA (2)(3) 66 107 -38% Cost of goods sold 937 853 2,786 2,525 Cash and cash equivalents $                 132 $                 265 Net income $                  45 $                389 Environmental expense (1) - 146 - 322
ADI Global Distribution Gross profit 289 347 898 1,036 Accounts receivable 845 821 Honeywell reimbursement agreement expense (2) 35 - 57 -
Revenue 714 674 6% Selling, general and administrative expenses 230 219 712 648 Inventories 729 628 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Estimated stand-alone costs (3) - - - 4
Constant Currency (Non-GAAP) 7% Operating Profit 59 128 186 388 Other current assets 134 95 Depreciation and amortization 55 49 Stock compensation expense (4) 8 6 22 15
 Segment Adjusted EBITDA (2)(3) 48 43 12% Other expense, net 35 144 54 320 Total current assets 1,840 1,809 Repositioning charges, net of payments 12 (4) Repositioning charges 9 - 34 5
Total Company Interest expense 16 2 51 2 Property, plant and equipment – net 306 300 Stock compensation expense 22 15 Other (5) 19 - 65 1
Revenue 1,226 1,200 2% Income (loss) before taxes 8 (18) 81 66 Goodwill 2,632 2,634 Deferred income taxes (3) (275) Income tax adjustments (6) (21) (355) (31) (415)
Constant Currency (Non-GAAP) 3% Tax expense (benefit)   - (329) 36 (323) Other intangible assets – net 125 133 Other noncash expense 13 17 Adjusted Net Income excluding Honeywell reimbursement agreement payments (Non-GAAP) 58 108 192 321
Adjusted EBITDA (Non-GAAP) (4) 79 117 -32% Net income $                    8 $                 311 $                   45 $                 389 Other assets 230 96 Changes in assets and liabilities: Assumed cash payments related to Honeywell Reimbursement Agreement (7) (35) (35) (105) (105)
Total assets $              5,133 $              4,972 Accounts, notes and other receivables (27) (11) Adjusted Net Income (Non-GAAP) $                  23 $                73 $                87 $             216
(1) Represents Product & Solutions revenue, net of intersegment revenue of $83 million for the three months ended September 30, 2019 and $77 million for the three months ended September 30, 2018, respectively. ADI Global Distribution does not have any intersegment revenue. Weighted Average Number of Common Shares Outstanding (in thousands) LIABILITIES Inventories (109) (142) Adjusted Earnings Per Share (Non-GAAP)
(2) Excludes $2 million of estimated stand-alone costs for the three months ended September 30, 2018 which is included in Adjusted EBITDA (Non-GAAP).   Basic 122,770 122,967 122,681 122,967 Current liabilities: Other current assets (13) (4) Basic adjusted net income per share (Non-GAAP) $               0.19 $              0.59 $             0.71 $            1.76
(3) Table 7 includes a Reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes. Diluted 123,244 122,967 123,404 122,967 Accounts payable $                 932 $                 964 Other assets (6) (6) Diluted adjusted net income per share (Non-GAAP) $               0.19 $              0.59 $             0.71 $            1.76
(4) Table 6 includes a Reconciliation of Net income to Adjusted EBITDA (non-GAAP). Earnings Per Share Short-term portion of debt 88 22 Accounts payable (23) 151
Basic $                0.07 $                2.53 $                0.37 $                3.16 Accrued liabilities 531 503 Accrued liabilities (6) (15) (1) Represents historical environmental expenses as reported under 100% carryover basis.
Diluted $                0.06 $                2.53 $                0.36 $                3.16 Total current liabilities 1,551 1,489 Obligations payable to Honeywell (49) - (2) Represents recorded expenses related to the Honeywell Reimbursement Agreement.
Other liabilities 19 211 (3) Represents the difference between our estimate of Selling, general and administrative costs as a stand-alone company and historical allocated costs. 
Long-term debt 1,165 1,179 Net cash (used for) provided by operating activities (70) 375 (4) Stock compensation expense adjustment includes only non-cash expenses.
Obligations payable to Honeywell 580 629 Cash flows used for investing activities: (5) Represents $19 million and $53 million in cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off,  and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, Other represents other non-operating (income) expense.  The nine months ended September 30, 2019 includes an adjustment for $6 million of costs directly related to the Spin-Off.  Costs from prior quarters of 2019 were identified during the third quarter as Spin-Off costs and are now included in our nine months ended adjustments.
Other liabilities 264 142 Expenditures for property, plant, equipment and software (66) (63) (6) Represents the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of discrete tax items, including the income tax impacts of the Tax Act. The tax effect of pre-tax items excluded from Adjusted Net Income is computed by adjusting the annualized effective tax rate to exclude the pre-tax non-GAAP adjustments noted above. The Income Tax Adjustment for the three and nine months ended September 30, 2018 has been revised to use this methodology, rather than statutory tax rates. This change in methodology increased the Income Tax Adjustment benefit and decreased Adjusted Net Income by $15 million and $49 million for the three and nine months ended September 30, 2018, respectively.  
EQUITY Cash paid for acquisitions, net of cash acquired (17) - (7) We are responsible to indemnify Honeywell in amounts equal to 90% of payments, which include amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case including consequential damages in respect of specified properties contaminated through historical business operations, including the legal and other costs of defending and resolving such liabilities, less 90% of Honeywell's net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales; such payments will be subject to a cap of $140 million in respect of liabilities arising in any given year (exclusive of any late payment fees up to 5% per annum). 
Common stock, $0.001 par value, 700,000 shares authorized, 123,382 and 122,967 shares issued and 122,786 and 122,499 shares outstanding as of September 30, 2019 and December 31, 2018, respectively - - Proceeds received related to amounts due from related parties - 7
Additional paid-in capital 1,751 1,720 Net cash used for investing activities (83) (56)
Treasury stock, at cost (3) - Cash flows provided by (used for) financing activities:
Retained earnings 47 2 Net proceeds from revolving credit facility 60 -
Accumulated other comprehensive loss (222) (189) Repayment of long-term debt (11) -
Total equity 1,573 1,533 Non-operating obligations paid to Honeywell, net (24) -
Total liabilities and equity $              5,133 $              4,972 Payments related to amounts due to related parties, net - (1)
Tax payments related to stock vestings (3) -
Net (decrease) in invested equity - (300)
Cashflow provided by cash pooling - 115
Net cash provided by (used for) financing activities 22 (186)
Effect of foreign exchange rate changes on cash and cash equivalents (2) (5)
Net (decrease) increase in cash and cash equivalents (133) 128
Cash and cash equivalents at beginning of period 265 56
Cash and cash equivalents at end of period $                132 $                184

 

Table 1: Summary of Financial Results – Segment Media:         Investors: Table 2: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS (UNAUDITED) Table 3: CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED) Table 4: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF CASH FLOWS (UNAUDITED) Table 5: RECONCILIATION OF NET INCOME (UNAUDITED) TO ADJUSTED NET INCOME (NON-GAAP) Table 6: RECONCILIATION OF NET INCOME (UNAUDITED) TO ADJUSTED EBITDA (NON-GAAP)
($ millions) Trent Perrotto     Michael Mercieca
(512) 726-3512    (512) 779-8646 Three Months Ended Nine Months Ended September 30, December 31,  Nine Months Ended Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
 3Q 2019   3Q 2018   % Change  trent.perrotto@resideo.com     michael.mercieca@resideo.com September 30, September 30, 2019 2018 September 30, September 30, September 30, September 30, September 30,
Products & Solutions investorrelations@resideo.com   2019 2018 2019 2018 (Dollars in millions, shares in thousands) 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
Revenue (1) 512 526 -3% (Dollars in millions except per share data) ASSETS (Dollars in millions) (Dollars in millions except per share data) (Dollars in millions)
Constant Currency (Non-GAAP) -1% Net revenue $              1,226 $              1,200 $              3,684 $              3,561 Current assets: Cash flows (used for) provided by operating activities: Net income (GAAP) $                   8 $               311 $                45 $             389 Net income (GAAP) $                    8 $                 311 $                   45 $                 389
 Segment Adjusted EBITDA (2)(3) 66 107 -38% Cost of goods sold 937 853 2,786 2,525 Cash and cash equivalents $                 132 $                 265 Net income $                  45 $                389 Environmental expense (1) - 146 - 322 Net interest expense (income) 16 - 49 (1)
ADI Global Distribution Gross profit 289 347 898 1,036 Accounts receivable 845 821 Honeywell reimbursement agreement expense (2) 35 - 57 - Tax expense (benefit)   - (329) 36 (323)
Revenue 714 674 6% Selling, general and administrative expenses 230 219 712 648 Inventories 729 628 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Estimated stand-alone costs (3) - - - 4 Depreciation and amortization 19 16 55 49
Constant Currency (Non-GAAP) 7% Operating Profit 59 128 186 388 Other current assets 134 95 Depreciation and amortization 55 49 Stock compensation expense (4) 8 6 22 15 EBITDA (Non-GAAP) 43 (2) 185 114
 Segment Adjusted EBITDA (2)(3) 48 43 12% Other expense, net 35 144 54 320 Total current assets 1,840 1,809 Repositioning charges, net of payments 12 (4) Repositioning charges 9 - 34 5 Environmental expense (1) - 146 - 322
Total Company Interest expense 16 2 51 2 Property, plant and equipment – net 306 300 Stock compensation expense 22 15 Other (5) 19 - 65 1 Honeywell reimbursement agreement expense (2) 35 - 57 -
Revenue 1,226 1,200 2% Income (loss) before taxes 8 (18) 81 66 Goodwill 2,632 2,634 Deferred income taxes (3) (275) Income tax adjustments (6) (21) (355) (31) (415) Estimated stand-alone costs (3) - 2 - 9
Constant Currency (Non-GAAP) 3% Tax expense (benefit)   - (329) 36 (323) Other intangible assets – net 125 133 Other noncash expense 13 17 Adjusted Net Income excluding Honeywell reimbursement agreement payments (Non-GAAP) 58 108 192 321 Stock compensation expense (4) 8 6 22 15
Adjusted EBITDA (Non-GAAP) (4) 79 117 -32% Net income $                    8 $                 311 $                   45 $                 389 Other assets 230 96 Changes in assets and liabilities: Assumed cash payments related to Honeywell Reimbursement Agreement (7) (35) (35) (105) (105) Repositioning charges 9 - 34 5
Total assets $              5,133 $              4,972 Accounts, notes and other receivables (27) (11) Adjusted Net Income (Non-GAAP) $                  23 $                73 $                87 $             216 Other (5) 19 - 65 1
(1) Represents Product & Solutions revenue, net of intersegment revenue of $83 million for the three months ended September 30, 2019 and $77 million for the three months ended September 30, 2018, respectively. ADI Global Distribution does not have any intersegment revenue. Weighted Average Number of Common Shares Outstanding (in thousands) LIABILITIES Inventories (109) (142) Adjusted Earnings Per Share (Non-GAAP) Adjusted EBITDA excluding Honeywell reimbursement agreement payments (Non-GAAP) 114 152 363 466
(2) Excludes $2 million of estimated stand-alone costs for the three months ended September 30, 2018 which is included in Adjusted EBITDA (Non-GAAP).   Basic 122,770 122,967 122,681 122,967 Current liabilities: Other current assets (13) (4) Basic adjusted net income per share (Non-GAAP) $               0.19 $              0.59 $             0.71 $            1.76 Assumed cash payments related to Honeywell Reimbursement Agreement (6) (35) (35) (105) (105)
(3) Table 7 includes a Reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes. Diluted 123,244 122,967 123,404 122,967 Accounts payable $                 932 $                 964 Other assets (6) (6) Diluted adjusted net income per share (Non-GAAP) $               0.19 $              0.59 $             0.71 $            1.76 Adjusted EBITDA (Non-GAAP) $                   79 $                 117 $                 258 $                 361
(4) Table 6 includes a Reconciliation of Net income to Adjusted EBITDA (non-GAAP). Earnings Per Share Short-term portion of debt 88 22 Accounts payable (23) 151
Basic $                0.07 $                2.53 $                0.37 $                3.16 Accrued liabilities 531 503 Accrued liabilities (6) (15) (1) Represents historical environmental expenses as reported under 100% carryover basis.
Diluted $                0.06 $                2.53 $                0.36 $                3.16 Total current liabilities 1,551 1,489 Obligations payable to Honeywell (49) - (2) Represents recorded expenses related to the Honeywell Reimbursement Agreement. (1) Represents historical environmental expenses as reported under 100% carryover basis.
Other liabilities 19 211 (3) Represents the difference between our estimate of Selling, general and administrative costs as a stand-alone company and historical allocated costs.  (2) Represents recorded expenses related to the Honeywell Reimbursement Agreement.
Long-term debt 1,165 1,179 Net cash (used for) provided by operating activities (70) 375 (4) Stock compensation expense adjustment includes only non-cash expenses. (3) Represents the difference between our estimate of Selling, general and administrative costs as a stand-alone company and historical allocated costs, which excludes corporate depreciation charges.
Obligations payable to Honeywell 580 629 Cash flows used for investing activities: (5) Represents $19 million and $53 million in cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off,  and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, Other represents other non-operating (income) expense.  The nine months ended September 30, 2019 includes an adjustment for $6 million of costs directly related to the Spin-Off.  Costs from prior quarters of 2019 were identified during the third quarter as Spin-Off costs and are now included in our nine months ended adjustments. (4) Stock compensation expense adjustment includes only non-cash expenses.
Other liabilities 264 142 Expenditures for property, plant, equipment and software (66) (63) (6) Represents the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of discrete tax items, including the income tax impacts of the Tax Act. The tax effect of pre-tax items excluded from Adjusted Net Income is computed by adjusting the annualized effective tax rate to exclude the pre-tax non-GAAP adjustments noted above. The Income Tax Adjustment for the three and nine months ended September 30, 2018 has been revised to use this methodology, rather than statutory tax rates. This change in methodology increased the Income Tax Adjustment benefit and decreased Adjusted Net Income by $15 million and $49 million for the three and nine months ended September 30, 2018, respectively.   (5) Represents $19 million and $53 million in cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off,  and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, Other represents other non-operating (income) expense.  The nine months ended September 30, 2019 includes an adjustment for $6 million of costs directly related to the Spin-Off.  Costs from prior quarters of 2019 were identified during the third quarter as Spin-Off costs and are now included in our nine months ended adjustments.
EQUITY Cash paid for acquisitions, net of cash acquired (17) - (7) We are responsible to indemnify Honeywell in amounts equal to 90% of payments, which include amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case including consequential damages in respect of specified properties contaminated through historical business operations, including the legal and other costs of defending and resolving such liabilities, less 90% of Honeywell's net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales; such payments will be subject to a cap of $140 million in respect of liabilities arising in any given year (exclusive of any late payment fees up to 5% per annum).  (6) Pursuant to the Honeywell Reimbursement Agreement, we are responsible to indemnify Honeywell in amounts equal to 90% of payments, which include amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case including consequential damages in respect of specified properties contaminated through historical business operations, including the legal and other costs of defending and resolving such liabilities, less 90% of Honeywell's net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales; such payments will be subject to a cap of $140 million in respect of liabilities arising in any given year (exclusive of any late payment fees up to 5% per annum). 
Common stock, $0.001 par value, 700,000 shares authorized, 123,382 and 122,967 shares issued and 122,786 and 122,499 shares outstanding as of September 30, 2019 and December 31, 2018, respectively - - Proceeds received related to amounts due from related parties - 7
Additional paid-in capital 1,751 1,720 Net cash used for investing activities (83) (56)
Treasury stock, at cost (3) - Cash flows provided by (used for) financing activities:
Retained earnings 47 2 Net proceeds from revolving credit facility 60 -
Accumulated other comprehensive loss (222) (189) Repayment of long-term debt (11) -
Total equity 1,573 1,533 Non-operating obligations paid to Honeywell, net (24) -
Total liabilities and equity $              5,133 $              4,972 Payments related to amounts due to related parties, net - (1)
Tax payments related to stock vestings (3) -
Net (decrease) in invested equity - (300)
Cashflow provided by cash pooling - 115
Net cash provided by (used for) financing activities 22 (186)
Effect of foreign exchange rate changes on cash and cash equivalents (2) (5)
Net (decrease) increase in cash and cash equivalents (133) 128
Cash and cash equivalents at beginning of period 265 56
Cash and cash equivalents at end of period $                132 $                184

 

Table 1: Summary of Financial Results – Segment Media:         Investors: Table 2: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS (UNAUDITED) Table 3: CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED) Table 4: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF CASH FLOWS (UNAUDITED) Table 5: RECONCILIATION OF NET INCOME (UNAUDITED) TO ADJUSTED NET INCOME (NON-GAAP) Table 6: RECONCILIATION OF NET INCOME (UNAUDITED) TO ADJUSTED EBITDA (NON-GAAP) Table 7: RECONCILIATION OF SEGMENT ADJUSTED EBITDA TO COMBINED INCOME FROM CONTINUING OPERATIONS BEFORE TAXES
($ millions) Trent Perrotto     Michael Mercieca
(512) 726-3512    (512) 779-8646 Three Months Ended Nine Months Ended September 30, December 31,  Nine Months Ended Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
 3Q 2019   3Q 2018   % Change  trent.perrotto@resideo.com     michael.mercieca@resideo.com September 30, September 30, 2019 2018 September 30, September 30, September 30, September 30, September 30, September 30, September 30,
Products & Solutions investorrelations@resideo.com   2019 2018 2019 2018 (Dollars in millions, shares in thousands) 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
Revenue (1) 512 526 -3% (Dollars in millions except per share data) ASSETS (Dollars in millions) (Dollars in millions except per share data) (Dollars in millions) (Dollars in millions)
Constant Currency (Non-GAAP) -1% Net revenue $              1,226 $              1,200 $              3,684 $              3,561 Current assets: Cash flows (used for) provided by operating activities: Net income (GAAP) $                   8 $               311 $                45 $             389 Net income (GAAP) $                    8 $                 311 $                   45 $                 389 Products & Solutions Segment Adjusted EBITDA $                   66 $                 107 $                 222 $                 333
 Segment Adjusted EBITDA (2)(3) 66 107 -38% Cost of goods sold 937 853 2,786 2,525 Cash and cash equivalents $                 132 $                 265 Net income $                  45 $                389 Environmental expense (1) - 146 - 322 Net interest expense (income) 16 - 49 (1) ADI Global Distribution Segment Adjusted EBITDA 48 43 141 124
ADI Global Distribution Gross profit 289 347 898 1,036 Accounts receivable 845 821 Honeywell reimbursement agreement expense (2) 35 - 57 - Tax expense (benefit)   - (329) 36 (323) Segment Adjusted EBITDA (1) 114 150 363 457
Revenue 714 674 6% Selling, general and administrative expenses 230 219 712 648 Inventories 729 628 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Estimated stand-alone costs (3) - - - 4 Depreciation and amortization 19 16 55 49 Environmental expense(2) - (146) - (322)
Constant Currency (Non-GAAP) 7% Operating Profit 59 128 186 388 Other current assets 134 95 Depreciation and amortization 55 49 Stock compensation expense (4) 8 6 22 15 EBITDA (Non-GAAP) 43 (2) 185 114 Honeywell reimbursement agreement expense (3) (35) - (57) -
 Segment Adjusted EBITDA (2)(3) 48 43 12% Other expense, net 35 144 54 320 Total current assets 1,840 1,809 Repositioning charges, net of payments 12 (4) Repositioning charges 9 - 34 5 Environmental expense (1) - 146 - 322 Net interest (expense) income  (16) - (49) 1
Total Company Interest expense 16 2 51 2 Property, plant and equipment – net 306 300 Stock compensation expense 22 15 Other (5) 19 - 65 1 Honeywell reimbursement agreement expense (2) 35 - 57 - Depreciation and amortization (19) (16) (55) (49)
Revenue 1,226 1,200 2% Income (loss) before taxes 8 (18) 81 66 Goodwill 2,632 2,634 Deferred income taxes (3) (275) Income tax adjustments (6) (21) (355) (31) (415) Estimated stand-alone costs (3) - 2 - 9 Stock compensation expense(4) (8) (6) (22) (15)
Constant Currency (Non-GAAP) 3% Tax expense (benefit)   - (329) 36 (323) Other intangible assets – net 125 133 Other noncash expense 13 17 Adjusted Net Income excluding Honeywell reimbursement agreement payments (Non-GAAP) 58 108 192 321 Stock compensation expense (4) 8 6 22 15 Repositioning charges (9) - (34) (5)
Adjusted EBITDA (Non-GAAP) (4) 79 117 -32% Net income $                    8 $                 311 $                   45 $                 389 Other assets 230 96 Changes in assets and liabilities: Assumed cash payments related to Honeywell Reimbursement Agreement (7) (35) (35) (105) (105) Repositioning charges 9 - 34 5 Other(5) (19) - (65) (1)
Total assets $              5,133 $              4,972 Accounts, notes and other receivables (27) (11) Adjusted Net Income (Non-GAAP) $                  23 $                73 $                87 $             216 Other (5) 19 - 65 1 Income (loss) before taxes $                    8 $                  (18) $                   81 $                   66
(1) Represents Product & Solutions revenue, net of intersegment revenue of $83 million for the three months ended September 30, 2019 and $77 million for the three months ended September 30, 2018, respectively. ADI Global Distribution does not have any intersegment revenue. Weighted Average Number of Common Shares Outstanding (in thousands) LIABILITIES Inventories (109) (142) Adjusted Earnings Per Share (Non-GAAP) Adjusted EBITDA excluding Honeywell reimbursement agreement payments (Non-GAAP) 114 152 363 466
(2) Excludes $2 million of estimated stand-alone costs for the three months ended September 30, 2018 which is included in Adjusted EBITDA (Non-GAAP).   Basic 122,770 122,967 122,681 122,967 Current liabilities: Other current assets (13) (4) Basic adjusted net income per share (Non-GAAP) $               0.19 $              0.59 $             0.71 $            1.76 Assumed cash payments related to Honeywell Reimbursement Agreement (6) (35) (35) (105) (105) (1) Excludes $2 million and $9 million of estimated stand-alone costs for the three and nine months ended September 30, 2018, which is included in adjusted EBITDA (Non-GAAP).
(3) Table 7 includes a Reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes. Diluted 123,244 122,967 123,404 122,967 Accounts payable $                 932 $                 964 Other assets (6) (6) Diluted adjusted net income per share (Non-GAAP) $               0.19 $              0.59 $             0.71 $            1.76 Adjusted EBITDA (Non-GAAP) $                   79 $                 117 $                 258 $                 361 (2) Represents historical environmental expenses as reported under 100% carryover basis.
(4) Table 6 includes a Reconciliation of Net income to Adjusted EBITDA (non-GAAP). Earnings Per Share Short-term portion of debt 88 22 Accounts payable (23) 151 (3) Represents recorded expenses related to the Honeywell Reimbursement Agreement.
Basic $                0.07 $                2.53 $                0.37 $                3.16 Accrued liabilities 531 503 Accrued liabilities (6) (15) (1) Represents historical environmental expenses as reported under 100% carryover basis. (4) Stock compensation expense adjustment includes only non-cash expenses.
Diluted $                0.06 $                2.53 $                0.36 $                3.16 Total current liabilities 1,551 1,489 Obligations payable to Honeywell (49) - (2) Represents recorded expenses related to the Honeywell Reimbursement Agreement. (1) Represents historical environmental expenses as reported under 100% carryover basis. (5) Represents $19 million and $53 million in cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off,  and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, Other represents other non-operating (income) expense.  The nine months ended September 30, 2019 includes an adjustment for $6 million of costs directly related to the Spin-Off.  Costs from prior quarters of 2019 were identified during the third quarter as Spin-Off costs and are now included in our nine months ended adjustments.
Other liabilities 19 211 (3) Represents the difference between our estimate of Selling, general and administrative costs as a stand-alone company and historical allocated costs.  (2) Represents recorded expenses related to the Honeywell Reimbursement Agreement.
Long-term debt 1,165 1,179 Net cash (used for) provided by operating activities (70) 375 (4) Stock compensation expense adjustment includes only non-cash expenses. (3) Represents the difference between our estimate of Selling, general and administrative costs as a stand-alone company and historical allocated costs, which excludes corporate depreciation charges.
Obligations payable to Honeywell 580 629 Cash flows used for investing activities: (5) Represents $19 million and $53 million in cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off,  and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, Other represents other non-operating (income) expense.  The nine months ended September 30, 2019 includes an adjustment for $6 million of costs directly related to the Spin-Off.  Costs from prior quarters of 2019 were identified during the third quarter as Spin-Off costs and are now included in our nine months ended adjustments. (4) Stock compensation expense adjustment includes only non-cash expenses.
Other liabilities 264 142 Expenditures for property, plant, equipment and software (66) (63) (6) Represents the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of discrete tax items, including the income tax impacts of the Tax Act. The tax effect of pre-tax items excluded from Adjusted Net Income is computed by adjusting the annualized effective tax rate to exclude the pre-tax non-GAAP adjustments noted above. The Income Tax Adjustment for the three and nine months ended September 30, 2018 has been revised to use this methodology, rather than statutory tax rates. This change in methodology increased the Income Tax Adjustment benefit and decreased Adjusted Net Income by $15 million and $49 million for the three and nine months ended September 30, 2018, respectively.   (5) Represents $19 million and $53 million in cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off,  and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, Other represents other non-operating (income) expense.  The nine months ended September 30, 2019 includes an adjustment for $6 million of costs directly related to the Spin-Off.  Costs from prior quarters of 2019 were identified during the third quarter as Spin-Off costs and are now included in our nine months ended adjustments.
EQUITY Cash paid for acquisitions, net of cash acquired (17) - (7) We are responsible to indemnify Honeywell in amounts equal to 90% of payments, which include amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case including consequential damages in respect of specified properties contaminated through historical business operations, including the legal and other costs of defending and resolving such liabilities, less 90% of Honeywell's net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales; such payments will be subject to a cap of $140 million in respect of liabilities arising in any given year (exclusive of any late payment fees up to 5% per annum).  (6) Pursuant to the Honeywell Reimbursement Agreement, we are responsible to indemnify Honeywell in amounts equal to 90% of payments, which include amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case including consequential damages in respect of specified properties contaminated through historical business operations, including the legal and other costs of defending and resolving such liabilities, less 90% of Honeywell's net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales; such payments will be subject to a cap of $140 million in respect of liabilities arising in any given year (exclusive of any late payment fees up to 5% per annum). 
Common stock, $0.001 par value, 700,000 shares authorized, 123,382 and 122,967 shares issued and 122,786 and 122,499 shares outstanding as of September 30, 2019 and December 31, 2018, respectively - - Proceeds received related to amounts due from related parties - 7
Additional paid-in capital 1,751 1,720 Net cash used for investing activities (83) (56)
Treasury stock, at cost (3) - Cash flows provided by (used for) financing activities:
Retained earnings 47 2 Net proceeds from revolving credit facility 60 -
Accumulated other comprehensive loss (222) (189) Repayment of long-term debt (11) -
Total equity 1,573 1,533 Non-operating obligations paid to Honeywell, net (24) -
Total liabilities and equity $              5,133 $              4,972 Payments related to amounts due to related parties, net - (1)
Tax payments related to stock vestings (3) -
Net (decrease) in invested equity - (300)
Cashflow provided by cash pooling - 115
Net cash provided by (used for) financing activities 22 (186)
Effect of foreign exchange rate changes on cash and cash equivalents (2) (5)
Net (decrease) increase in cash and cash equivalents (133) 128
Cash and cash equivalents at beginning of period 265 56
Cash and cash equivalents at end of period $                132 $                184

 

Table 1: Summary of Financial Results – Segment Media:         Investors: Table 2: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF OPERATIONS (UNAUDITED) Table 3: CONSOLIDATED INTERIM BALANCE SHEET (UNAUDITED) Table 4: CONSOLIDATED AND COMBINED INTERIM STATEMENT OF CASH FLOWS (UNAUDITED) Table 5: RECONCILIATION OF NET INCOME (UNAUDITED) TO ADJUSTED NET INCOME (NON-GAAP) Table 6: RECONCILIATION OF NET INCOME (UNAUDITED) TO ADJUSTED EBITDA (NON-GAAP) Table 7: RECONCILIATION OF SEGMENT ADJUSTED EBITDA TO COMBINED INCOME FROM CONTINUING OPERATIONS BEFORE TAXES Table 8: RECONCILIATION OF CONSTANT CURRENCY REVENUE % CHANGE
($ millions) Trent Perrotto     Michael Mercieca
(512) 726-3512    (512) 779-8646 Three Months Ended Nine Months Ended September 30, December 31,  Nine Months Ended Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
 3Q 2019   3Q 2018   % Change  trent.perrotto@resideo.com     michael.mercieca@resideo.com September 30, September 30, 2019 2018 September 30, September 30, September 30, September 30, September 30, September 30, September 30, September 30, September 30,
Products & Solutions investorrelations@resideo.com   2019 2018 2019 2018 (Dollars in millions, shares in thousands) 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2019
Revenue (1) 512 526 -3% (Dollars in millions except per share data) ASSETS (Dollars in millions) (Dollars in millions except per share data) (Dollars in millions) (Dollars in millions) (Dollars in millions)
Constant Currency (Non-GAAP) -1% Net revenue $              1,226 $              1,200 $              3,684 $              3,561 Current assets: Cash flows (used for) provided by operating activities: Net income (GAAP) $                   8 $               311 $                45 $             389 Net income (GAAP) $                    8 $                 311 $                   45 $                 389 Products & Solutions Segment Adjusted EBITDA $                   66 $                 107 $                 222 $                 333 Products & Solutions revenue (decline) growth
 Segment Adjusted EBITDA (2)(3) 66 107 -38% Cost of goods sold 937 853 2,786 2,525 Cash and cash equivalents $                 132 $                 265 Net income $                  45 $                389 Environmental expense (1) - 146 - 322 Net interest expense (income) 16 - 49 (1) ADI Global Distribution Segment Adjusted EBITDA 48 43 141 124 Net Products & Solutions revenue (decline) growth (GAAP) $                            (14) $                             33
ADI Global Distribution Gross profit 289 347 898 1,036 Accounts receivable 845 821 Honeywell reimbursement agreement expense (2) 35 - 57 - Tax expense (benefit)   - (329) 36 (323) Segment Adjusted EBITDA (1) 114 150 363 457 % Change -3% 2%
Revenue 714 674 6% Selling, general and administrative expenses 230 219 712 648 Inventories 729 628 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Estimated stand-alone costs (3) - - - 4 Depreciation and amortization 19 16 55 49 Environmental expense(2) - (146) - (322) Exclude: Foreign currency translation -2% -3%
Constant Currency (Non-GAAP) 7% Operating Profit 59 128 186 388 Other current assets 134 95 Depreciation and amortization 55 49 Stock compensation expense (4) 8 6 22 15 EBITDA (Non-GAAP) 43 (2) 185 114 Honeywell reimbursement agreement expense (3) (35) - (57) - Constant currency (decline) growth (Non-GAAP) -1% 5%
 Segment Adjusted EBITDA (2)(3) 48 43 12% Other expense, net 35 144 54 320 Total current assets 1,840 1,809 Repositioning charges, net of payments 12 (4) Repositioning charges 9 - 34 5 Environmental expense (1) - 146 - 322 Net interest (expense) income  (16) - (49) 1
Total Company Interest expense 16 2 51 2 Property, plant and equipment – net 306 300 Stock compensation expense 22 15 Other (5) 19 - 65 1 Honeywell reimbursement agreement expense (2) 35 - 57 - Depreciation and amortization (19) (16) (55) (49)
Revenue 1,226 1,200 2% Income (loss) before taxes 8 (18) 81 66 Goodwill 2,632 2,634 Deferred income taxes (3) (275) Income tax adjustments (6) (21) (355) (31) (415) Estimated stand-alone costs (3) - 2 - 9 Stock compensation expense(4) (8) (6) (22) (15) ADI Global Distribution revenue growth
Constant Currency (Non-GAAP) 3% Tax expense (benefit)   - (329) 36 (323) Other intangible assets – net 125 133 Other noncash expense 13 17 Adjusted Net Income excluding Honeywell reimbursement agreement payments (Non-GAAP) 58 108 192 321 Stock compensation expense (4) 8 6 22 15 Repositioning charges (9) - (34) (5) Net ADI Global Distribution revenue growth (GAAP) $                             40 $                             90
Adjusted EBITDA (Non-GAAP) (4) 79 117 -32% Net income $                    8 $                 311 $                   45 $                 389 Other assets 230 96 Changes in assets and liabilities: Assumed cash payments related to Honeywell Reimbursement Agreement (7) (35) (35) (105) (105) Repositioning charges 9 - 34 5 Other(5) (19) - (65) (1) % Change 6% 5%
Total assets $              5,133 $              4,972 Accounts, notes and other receivables (27) (11) Adjusted Net Income (Non-GAAP) $                  23 $                73 $                87 $             216 Other (5) 19 - 65 1 Income (loss) before taxes $                    8 $                  (18) $                   81 $                   66 Exclude: Foreign currency translation -1% -1%
(1) Represents Product & Solutions revenue, net of intersegment revenue of $83 million for the three months ended September 30, 2019 and $77 million for the three months ended September 30, 2018, respectively. ADI Global Distribution does not have any intersegment revenue. Weighted Average Number of Common Shares Outstanding (in thousands) LIABILITIES Inventories (109) (142) Adjusted Earnings Per Share (Non-GAAP) Adjusted EBITDA excluding Honeywell reimbursement agreement payments (Non-GAAP) 114 152 363 466 Constant currency growth (Non-GAAP) 7% 6%
(2) Excludes $2 million of estimated stand-alone costs for the three months ended September 30, 2018 which is included in Adjusted EBITDA (Non-GAAP).   Basic 122,770 122,967 122,681 122,967 Current liabilities: Other current assets (13) (4) Basic adjusted net income per share (Non-GAAP) $               0.19 $              0.59 $             0.71 $            1.76 Assumed cash payments related to Honeywell Reimbursement Agreement (6) (35) (35) (105) (105) (1) Excludes $2 million and $9 million of estimated stand-alone costs for the three and nine months ended September 30, 2018, which is included in adjusted EBITDA (Non-GAAP).
(3) Table 7 includes a Reconciliation of Segment Adjusted EBITDA to Income (loss) before taxes. Diluted 123,244 122,967 123,404 122,967 Accounts payable $                 932 $                 964 Other assets (6) (6) Diluted adjusted net income per share (Non-GAAP) $               0.19 $              0.59 $             0.71 $            1.76 Adjusted EBITDA (Non-GAAP) $                   79 $                 117 $                 258 $                 361 (2) Represents historical environmental expenses as reported under 100% carryover basis. Total revenue growth
(4) Table 6 includes a Reconciliation of Net income to Adjusted EBITDA (non-GAAP). Earnings Per Share Short-term portion of debt 88 22 Accounts payable (23) 151 (3) Represents recorded expenses related to the Honeywell Reimbursement Agreement. Total revenue growth (GAAP) $                             26 $                           123
Basic $                0.07 $                2.53 $                0.37 $                3.16 Accrued liabilities 531 503 Accrued liabilities (6) (15) (1) Represents historical environmental expenses as reported under 100% carryover basis. (4) Stock compensation expense adjustment includes only non-cash expenses. % Change 2% 3%
Diluted $                0.06 $                2.53 $                0.36 $                3.16 Total current liabilities 1,551 1,489 Obligations payable to Honeywell (49) - (2) Represents recorded expenses related to the Honeywell Reimbursement Agreement. (1) Represents historical environmental expenses as reported under 100% carryover basis. (5) Represents $19 million and $53 million in cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off,  and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, Other represents other non-operating (income) expense.  The nine months ended September 30, 2019 includes an adjustment for $6 million of costs directly related to the Spin-Off.  Costs from prior quarters of 2019 were identified during the third quarter as Spin-Off costs and are now included in our nine months ended adjustments. Exclude: Foreign currency translation -1% -2%
Other liabilities 19 211 (3) Represents the difference between our estimate of Selling, general and administrative costs as a stand-alone company and historical allocated costs.  (2) Represents recorded expenses related to the Honeywell Reimbursement Agreement. Constant currency growth (Non-GAAP) 3% 5%
Long-term debt 1,165 1,179 Net cash (used for) provided by operating activities (70) 375 (4) Stock compensation expense adjustment includes only non-cash expenses. (3) Represents the difference between our estimate of Selling, general and administrative costs as a stand-alone company and historical allocated costs, which excludes corporate depreciation charges.
Obligations payable to Honeywell 580 629 Cash flows used for investing activities: (5) Represents $19 million and $53 million in cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off,  and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, Other represents other non-operating (income) expense.  The nine months ended September 30, 2019 includes an adjustment for $6 million of costs directly related to the Spin-Off.  Costs from prior quarters of 2019 were identified during the third quarter as Spin-Off costs and are now included in our nine months ended adjustments. (4) Stock compensation expense adjustment includes only non-cash expenses.
Other liabilities 264 142 Expenditures for property, plant, equipment and software (66) (63) (6) Represents the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of discrete tax items, including the income tax impacts of the Tax Act. The tax effect of pre-tax items excluded from Adjusted Net Income is computed by adjusting the annualized effective tax rate to exclude the pre-tax non-GAAP adjustments noted above. The Income Tax Adjustment for the three and nine months ended September 30, 2018 has been revised to use this methodology, rather than statutory tax rates. This change in methodology increased the Income Tax Adjustment benefit and decreased Adjusted Net Income by $15 million and $49 million for the three and nine months ended September 30, 2018, respectively.   (5) Represents $19 million and $53 million in cost directly related to the Spin-Off, $0 million and $13 million related to developments on legal claims that arose prior to Spin-Off,  and $0 million and ($1) million in non-operating (income) expense adjustment which excludes net interest (income) for the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, Other represents other non-operating (income) expense.  The nine months ended September 30, 2019 includes an adjustment for $6 million of costs directly related to the Spin-Off.  Costs from prior quarters of 2019 were identified during the third quarter as Spin-Off costs and are now included in our nine months ended adjustments.
EQUITY Cash paid for acquisitions, net of cash acquired (17) - (7) We are responsible to indemnify Honeywell in amounts equal to 90% of payments, which include amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case including consequential damages in respect of specified properties contaminated through historical business operations, including the legal and other costs of defending and resolving such liabilities, less 90% of Honeywell's net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales; such payments will be subject to a cap of $140 million in respect of liabilities arising in any given year (exclusive of any late payment fees up to 5% per annum).  (6) Pursuant to the Honeywell Reimbursement Agreement, we are responsible to indemnify Honeywell in amounts equal to 90% of payments, which include amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Spin-Off, hazardous exposure or toxic tort claims, in each case including consequential damages in respect of specified properties contaminated through historical business operations, including the legal and other costs of defending and resolving such liabilities, less 90% of Honeywell's net insurance receipts relating to such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities, (ii) contributions by other parties relating to such liabilities and (iii) certain property sales; such payments will be subject to a cap of $140 million in respect of liabilities arising in any given year (exclusive of any late payment fees up to 5% per annum). 
Common stock, $0.001 par value, 700,000 shares authorized, 123,382 and 122,967 shares issued and 122,786 and 122,499 shares outstanding as of September 30, 2019 and December 31, 2018, respectively - - Proceeds received related to amounts due from related parties - 7
Additional paid-in capital 1,751 1,720 Net cash used for investing activities (83) (56)
Treasury stock, at cost (3) - Cash flows provided by (used for) financing activities:
Retained earnings 47 2 Net proceeds from revolving credit facility 60 -
Accumulated other comprehensive loss (222) (189) Repayment of long-term debt (11) -
Total equity 1,573 1,533 Non-operating obligations paid to Honeywell, net (24) -
Total liabilities and equity $              5,133 $              4,972 Payments related to amounts due to related parties, net - (1)
Tax payments related to stock vestings (3) -
Net (decrease) in invested equity - (300)
Cashflow provided by cash pooling - 115
Net cash provided by (used for) financing activities 22 (186)
Effect of foreign exchange rate changes on cash and cash equivalents (2) (5)
Net (decrease) increase in cash and cash equivalents (133) 128
Cash and cash equivalents at beginning of period 265 56
Cash and cash equivalents at end of period $                132 $                184

Forward-Looking Statements

This release contains "forward-looking statements." All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results or performance of the company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, those described under the headings "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended Dec. 31, 2018 filed with the Securities and Exchange Commission ("SEC"). You are cautioned not to place undue reliance on these forward-looking statements, such as guidance regarding full-year 2019, our ability to realize cost reductions over the lifecycle of our products and realize related gross margin opportunity, the commencement, progress and results of the comprehensive operational and financial review, including our ability to improve operating margins, core business processes, direct product costs, and G&A, our cost optimization program and our ability to achieve $15 million of realized savings in 2019 and $50 million of run-rate savings by the end of 2020, and our ability to work with our professional partners to better position the T-Series and the related expected significant sales improvement in 2020, each of which speak only as of the date of this release. Forward looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements.

Non-GAAP Financial Measures

This release includes EBITDA, adjusted EBITDA, adjusted EBITDA excluding Honeywell reimbursement agreement payments, adjusted Net Income, adjusted Net Income excluding Honeywell reimbursement agreement payments, adjusted basic and diluted earnings per share, constant currency growth, and other financial measures not compliant with generally accepted accounting principles in the United States (GAAP). The non-GAAP financial measures are adjusted for certain items above and may not be directly comparable to similar measures used by other companies in our industry, as other companies may define such measures differently. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends and provide useful additional information relating to our operations and financial condition. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Refer to the tables above in this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. We believe EBITDA, adjusted EBITDA excluding Honeywell reimbursement agreement payments, adjusted Net Income, adjusted Net Income excluding Honeywell reimbursement agreement payments, adjusted basic and diluted earnings per share, and constant currency growth are important indicators of operating performance. They should be read in connection with our financial statements presented in accordance with GAAP. 

A reconciliation of adjusted EBITDA to the corresponding GAAP measure is not available on a forward-looking basis without unreasonable efforts due to the impact and timing on future operating results arising from items excluded from these measures, particularly environmental expense, Honeywell reimbursement agreement expense or gain, stock compensation expense, repositioning charges, and other non-operating expense (income). 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/resideo-releases-third-quarter-2019-results-in-line-with-oct-22-preliminary-results-300953254.html

SOURCE Resideo Technologies, Inc.

In This Story

REZI